Shares of Zynga Inc. (NASDAQ: ZNGA) tumbled 20% in premarket trading on Friday after the company late on Thursday downwardly revised its outlook on fiscal 2012. The company has now slashed its fiscal 2012 guidance for the second time in last two months.
The social gaming company, which reached at its pinnacle during 2009-2010, has struggled to maintain investors’ trust as falling users, increasing competition eroded its market-share. On Thursday, Zynga said that lackluster performance from live internet games and huge write-down associated to an acquisition will dampen fiscal third quarter results.
ZNGA that it expects a loss of 12 cents to 14 cents in the fiscal third quarter while projected EBITDA for 2012 is anticipated in the range of $147-million to $162-million, down from earlier estimates of $180-million to $250-million.
Zynga’s Chief Executive and founder Mark Pincus said that while most of Zynga’s game performed to the plan but overall the company could not execute satisfactorily. Pincus also added that third quarter will be very “challenging”.
Addressing analysts, Pincus said, “We’re addressing these near-term challenges by implementing targeted cost reductions in the fourth quarter and rationalizing our product R&D pipeline to reflect our strategic priorities. At the same time, we are continuing to invest in our mobile business where we have one of the strongest positions in the industry.”
The san Francisco based company also said that it will write-down $85 million to $95 million towards a failed acquisition. In March, Zynga acquired OMGPOP, a New York game studio for $182 million; nevertheless, the decision backfired as Draw Something, once a hit game, failed to repeat the success.
Earlier in July the company had downwardly revised its earnings outlook for fiscal 2012, which resulted in sharp sell-off of Zynga shares. Shares plunged 40 percent at that time.
Besides flagging users and falling popularity of its games such as City Ville, the company has also witnessed some of its top executives leaving, denting the morale of employees.
Zynga is scheduled to report fiscal third-quarter results on October 24.
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